The most important thing to remember about big data is that it’s only valuable in context.
In the hands of trained data scientists, relevant information might just be the single most powerful weapon in the arsenal of any business.
However, 0s and 1s are absolutely worthless on their own.
What this means is that big data is not “the next oil,” as many analysts continue to insist on calling it.
Now, this isn’t to say that big data won’t be reeling in massive profits. It will. But framing the industry this way confuses how it operates.
There’s never going to be a benchmark for data, nor will there ever be issues concerning supply.
No one is ever going to talk about “peak data,” because data is not a finite resource.
Data is virtually unlimited, which means that value will not stem from the quantity, but rather from quality.
If you’re finding it hard to let go of the oil analogy, try to think of big data as a midstream player…
It’s important to recognize that when we talk about big data, we’re talking about a service, not a commodity.
Ultimately, the most profitable businesses in big data will be those that refine it — a fact that is becoming increasingly clear as major industry leaders continue making massive investments in data analytics.
Billion-Dollar Binary
Earlier this week, agriculture giant Monsanto (NYSE: MON) announced a definitive agreement to acquire The Climate Corporation at a cost of $930 million.
The Climate Corporation is a data analytics company that studies historical climate trends such as rainfall, crop growth, and soil quality. By analyzing vast amounts of ecological information, the company can predict production outcomes and guide farm management more efficiently.
Monsanto plans to use the company’s resources to reach what the New York Times is calling “the next level of agriculture.”
While this is all very exciting, it doesn’t exactly make Monsanto the center of this story…
Sure, Monsanto is going to see the benefit of big data, but I’m not rushing out to buy shares of the company on this news. Monsanto has a $55 billion market cap and is trading near a five-year high; it’s not making any big moves any time soon.
What is important about this acquisition, however, is that it’s yet another example of how big data is applicable to real-word, physical applications.
Contrary to common belief, big data is not exclusive to social media and Internet advertising.
As it turns out, 0s and 1s are far more valuable than you might think — and this has been the case for quite some time now. Big data has already made its way to the health care, retail, manufacturing, insurance, and energy sectors. Take General Electric (NYSE: GE), for example…
The company just spent $1 billion to build its Global Software Center to monitor and guide nearly every aspect of its industrial operations.
The fourth largest U.S. railroad in the United States, Norfolk Southern (NYSE: NSC) uses customized data analysis software to monitor diesel locomotive traffic and reduce congestion. By increasing speeds by an average of just 1 mph, NSC is saving more than $200 million in expenses.
And when it comes to the U.S. economic performance, big data could just be the nation’s saving grace. McKinsey & Company estimates the use of big data could boost annual economic productivity by $610 billion in costs and savings. In manufacturing alone, the group estimates an additional $325 billion to annual GDP by 2020.
Big Data Drilling
Big data is so pervasive that some analysts are even willing to say that it’s been the primary cause of the U.S. shale boom…
So while big data might not be “the next oil,” it certainly is “the next big thing” in oil.
Here’s what energy expert Mark Mills had to say about the issue:
While hydraulic fracturing is often claimed as the proximate cause of the energy revolution, the enabler has been smart drilling. Fracking has been around for decades, as has horizontal drilling.
The new abundance comes from knowing where to drill, where to steer in the subsurface, and how to manage production in real time. Subsurface imaging, sensors, and analytics are revolutionary. The hydrocarbon future is like everything else now, all about information technology.
In the oil industry, there are several companies pioneering technological advances to enhance exploration and production.
Exxon (NYSE: XOM) has an extensive set of tools in seismic data collection and subsurface modeling.
IBM (NYSE: IBM) also offers an information management platform for analyzing drilling production data.
You’ll also want to take a look at the world’s leading oil and gas service provider, Schlumberger Limited (NYSE: SLB). The company provides technological solutions for oil and gas exploration — including software platforms, data interpretation, reservoir imaging, and information management.
If you’re looking for something with a smaller market cap, your best bet on the public market is CCG SA (NYSE: CGG). The company acquires onshore and offshore seismic data to provide imaging and analysis for oil exploration and development.
CGG has taken a bit of a beating this year, but shares recently hit a relative strength index (RSI) below 30. This indicates selling momentum is becoming exhausted, and the stock is oversold.
You’ll want to look for a double-bottom at $22.
We’re currently siting on a doji indicating that’s our new floor.
Turning progress to profits,
Jason Stutman
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